Correlation Between ExlService Holdings and Installed Building

Can any of the company-specific risk be diversified away by investing in both ExlService Holdings and Installed Building at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ExlService Holdings and Installed Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ExlService Holdings and Installed Building Products, you can compare the effects of market volatilities on ExlService Holdings and Installed Building and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ExlService Holdings with a short position of Installed Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of ExlService Holdings and Installed Building.

Diversification Opportunities for ExlService Holdings and Installed Building

0.41

Correlation Coefficient

ExlService Holdings  Installed Building

Very weak diversification

The 3 months correlation between ExlService and Installed is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ExlService Holdings and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building and ExlService Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ExlService Holdings are associated (or correlated) with Installed Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of ExlService Holdings i.e., ExlService Holdings and Installed Building go up and down completely randomly.

Pair Corralation between ExlService Holdings and Installed Building

Given the investment horizon of 90 days ExlService Holdings is expected to generate 0.63 times more return on investment than Installed Building. However, ExlService Holdings is 1.59 times less risky than Installed Building. It trades about 0.07 of its potential returns per unit of risk. Installed Building Products is currently generating about 0.01 per unit of risk. If you would invest  4,426  in ExlService Holdings on December 30, 2024 and sell it today you would earn a total of  254.00  from holding ExlService Holdings or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ExlService Holdings  vs.  Installed Building Products

ExlService Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, ExlService Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Installed Building

Risk-Adjusted Performance

Very Weak

Over the last 90 days Installed Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Installed Building is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ExlService Holdings and Installed Building

The main advantage of trading using opposite ExlService Holdings and Installed Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ExlService Holdings position performs unexpectedly, Installed Building can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Installed Building will offset losses from the drop in Installed Building's long position.

The idea behind ExlService Holdings and Installed Building Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.